Is The Fed Going To Attempt A Controlled Collapse?

As most Fed watchers know, last week was interesting because Janet Yellen, speaking at IMF came out and said something quite surprising. In a nutshell, she said “It’s not the Fed’s job to pop bubbles”. While many market participants immediately took this to mean, “To the moon, Alice!” and started buying equities hand over fist, there’s another possible explanation for Mrs. Yellen’s proclamation of unwillingness: The Fed could be preparing to do exactly what it said it wouldn’t.

Here’s a quick re-cap of events: In the recently released Annual Report of the BIS: Bank for International Settlements (commonly thought of as the “central bank’s central bank”) the BIS made a rather ominous recommendation to it’s member banks: Pop this bubble now. Their specific language wasn’t quite so direct, but the message was just as clear.

The risk of normalising too late and too gradually should not be underestimated… The trade-off is now between the risk of bringing forward the downward leg of the cycle and that of suffering a bigger bust later on .

Few are ready to curb financial booms that make everyone feel illusively richer. Or to hold back on quick fixes for output slowdowns, even if such measures threaten to add fuel to unsustainable financial booms,” …

“The road ahead may be a long one. All the more reason, then, to start the journey sooner rather than later.”

As we noted last week, there are a couple of fascinating things to note about this recommendation. First, for anyone who thinks that the concept of intentionally crashing the stock market is the stuff of conspiracy theorists, that notion is now dead and buried. It’s extremely clear from the BIS’ language, that the concept of initiating a collapse is openly discussed as a policy measure. This was a direct recommendation to bring on the crash – or as they say so colorfully, to “bring forward the downward leg of the cycle”.

More kabuki?

But what else is fascinating is that just days after the BIS report was released, Janet Yellen seemed to counter the BIS in her presentation to the IMF:

“At this point, it should be clear that I think efforts to build resilience in the financial system are critical to minimizing the chance of financial instability and the potential damage from it. This focus on resilience differs from much of the public discussion, which often concerns whether some particular asset class is experiencing a ‘bubble’ and whether policymakers should attempt to pop the bubble. Because a resilient financial system can withstand unexpected developments, identification of bubbles is less critical.”

What Yellen seemed to be saying — quite possibly in direct response to the BIS’s recommendations — is that the Fed isn’t in the business of popping bubbles, nor does it see a reason to intervene in their development.

So to summarize: The BIS publicly recommended popping the bubble now… and Yellen said no.

So what’s going on?

We could take all of this at face value if we chose: The BIS playing hawk, and the Fed playing dove. And that might well be the case — as to some extent Yellen is still something of an unknown entity.

Yellen is going to orchestrate a controlled collapse. Or, at least one which we hope is controlled.

There are political considerations to be made, however: The Fed, which has not only come under intense fire for overt market manipulation, but which is also deeply concerned with market perception, simply cannot afford to be perceived as an instrument of the market’s collapse. To be seen as the instigator of a crash could do irreparable harm to the institution.

Pop bubbles? Who us?

So just maybe the Fed fully intends on heeding the advice of the BIS, and is strategically positioning itself as a stalwart dove to shield itself from the public fallout of it’s orchestrated financial calamity. A particularly sound play from a political perspective in the event that things don’t go as smoothly as planned.

One thing is certain at this point: An intentionally orchestrated crash is the direct recommendation of the BIS, per it’s annual report. That this action exists as a potential policy measure is now confirmed.

The remaining question is: Would the Federal Reserve pursue such a policy measure openly, or behind the same curtains from which most of their historic policies were enacted.

As we re-think Mrs. Yellen’s speech to the IMF, we are less certain that the Fed is as unwilling to intervene as Mrs Yellen would have us believe. Bringing forward the next leg of the cycle, may well be on the Fed’s agenda.

Agreed. Why would the BIS and Yellen publically comment on this when they don't have to? Something is up. I think they are just marinating the public with 100% pure bad guy/good guy bullshit and wait for a juicy false flag event or natural disaster so they can shift the blame on helping rebuild the country.

This whole article seems a bit like discussing advanced Rock/Paper/Scissors game theory.

Look, are we all invested in the idea that the Fed will print to infinity or aren't we? Couple months ago, seemed like we were all in lock-step agreement. Now all the second guessing and third guessing about this.

I'm invested in the idea that the fed controis the bond market and by extension the stock market. There will be no overthrow of either one anytime soon. I see no reason why the biggest banks etc would blow their brains out or the fed would endorse it. I live 45 mins from the Hamptons and can assure you that they have nothing to gain from that.

This is currently the biggest problem in the 1% Hamptons world right now

OK Fonz....You're one of their neighbors, do something about it, for fucks sake!Bitch, complain, boycott their stores, picket their driveways, shit on their lawns, piss in their pools ...Wrap dead fishes in their newspapers for fun.Light paper bags of poop on their front steps, ring the doorbell and run, hiding behind a bush, laughing maniacally.Just fucking Do Something!

Denise Rich dies on her boat. Are we talking the one and only very same Denise Rich wife of Markie Mark "Got My Pardon from Slick Willy, Bitchez" Rich?I mean fucking seriously.DO SOMETHING, GODDAMNIT!

Better yet, go into a really fancy restaurant and get seated next to a bunch of them and crap your pants, act like nothing's wrong and see how long it takes them to act up like a bunch of immature, problematic, self centered children.

Go for it, bud.I gotchur "back" (side) on this one!I'll be there with you in spirit.You can count on meAnd Kaiserhoff, too.Right Kaiser?

Go for it!You could be headline news on page 6 of the NY Post.Even make it to one of them crazy guy's radio shows.

How? The well-heeled harvest their stables of ne'er do well inbred offspring to take the helm when the light of day gets close to their shadows if only to rule for another decade. The OWNERS breed lowers into the mix to keep you and I perplexed.

I see, so living in such close proximity to faux wealth is your qualifier? The Hamptons? By the way, the biggest banks blew their brains out in 07, so what, they are bigger today with less compitition. I'm not sure you know how this really works.

You ever see the interview with Cobb when when he was really old and the interviewer read him his stats and said "if you were playing today, what do you think you would bat?" and he said ".325". The interviewer said, "really. that is below your career average" and he said "i'm 75 years old". funny stuff.

+1 fonz. The TBTF know they arent getting bailed out again. Public opinion wont stand for it. The FED plays a bigger game. Financial crisis = soveriegn crisis = political crisis = public crisis (currency crisis). We are somewhere between stages 2 and 3... maybe not even at stage 3. This crap takes time to run out. Like a dying business that still has cash flow. The "robbing Peter to pay Paul" sort of action can go on until cash flow really chokes and there aren't any more checks to kite.

center, thank you for helping provide clarity/logic to this "discussion."

It always amazes me how on one hand folks can talk up about how the Fed/govt can NOT create anything and then on the other hand expect them to do something. Yes, I get it that we (well, I DO) want them to STOP DOING and to just get out of our lives, BUT, that WON'T "solve" our REAL PROBLEMS!

How much more do we expect these people to do to tell us that growth is dead? The entire fucking game is predicated on growth and now that growth just cannot happen anymore, well, how difficult is it to figure out that dividing by ZERO gets us ZERO? Those believing that the Fed/govt are only obstructing us from nrivana need to actually use brain cells to analyze the situation (or fess up that they're being disingenuous- that they're only being deceptive in order to try and bilk out an extra few crumbs for themselves: I get this, and well... FINE! do it, but STFU about slathering it in pure BS about how we can all be saved by some sort of "pure system" that is, of course, predicated on perpetual growth).

The LAST thing that these folks (TPTB) want is to change things. They KNOW that the entire System is unable to deliver and is therefore unable to provide any semblance of predictability of their future being like their past (maintaining control). All that they will do is to continue to do what they've been doing until they can no longer.

The world has pretty much been faking growth since the early 70s. It's the end of the line for the smoke and mirrors game, and with it nearly all of that we see around us.

All that they will do is to continue to do what they've been doing until they can no longer.

Usually when people think that they are losing control, they try harder to control things...governments, too. This is why they are preparing for some sort of armageddon, arming up every conceivable government agency to the teeth.

You're right, though, exponential growth is a fiction, and the only sustainable thing is say, 1 million people per continent...but how do you get to something even remotely close to this?

Fonz, the bays can be hairy, all you see is surface and think " oh, I have plenty of room " as you drift out of a channel and BAM drive your skag into bottom mud . I'm a neophyte captain and I have to tell you it is extemely challenging . I never had to call sea- tow though.

Oh the sailing stories that I have to tell! Tip: NEVER trust your gold with me!

Better mud and sand than ROCK! (fortunately it was a only a skim off the top of the rock- boat's owner had once slammed at nearly hull speed dead into one and a haul-out showed no damage- hell-for-stout, quality stuff is nice!) Or docks! (at some remote place where someone I knew just happened to be there to see it!)

The god damned BIS, Fed and IMF have thousands of little employees who do nothing but write "papers" every day. NOBODY fucking takes any of them seriously. The decisions are made at the top, based on gut feelings and not some pseudo science.

The central banks will print and print, then print some more. They have no choice. All the govs are deficit spending and they won't ever do even 1% austerity. So the future is more competitive devaluation, until eventually it hyperventilates.

This probably won't happen for decades. After Japan and all the socialist European states "go Greece", we can worry about it here.

the dollar becomes worth more once there is a crash. liquidity will come surging back from emerging markets and massive demand for dollars and cash will bring massive amounts of money into bonds for the fed to unload trillions worth of shitty as near zirp bonds onto reitirees and pension funds for decades. After that, they reverse the dump and bring back the pump.

meanwhile ans foreign nations are less likely to buy treasuries, the dollar can weaken and lose status as the international reserve currency slowly----it doesn't have to happen all at once like in some cartoon.

The world's System relies on VOLUME, large scale participation. If you have been awake you'd see that more and more people are becoming marginalized, and that this translates to fewer people being engaged in the System. Eventually people won't see any value in the System.

The next "crash" is likely to be the "Big One." I highly doubt that there will be anything of a bond market around.

"the dollar can weaken and lose status as the international reserve currency slowly"

Sure, anything is "possible" (Loyds of London has odds for Elvis returning on a space ship!), it's thorugh the lens of PROBABILITY that provides for meaningful analysis. And with that in mind we'd have to see how history has recorded such events... do we have examples here?

kh, no offense. May I suggest a better name for Yellen the Felon......A donkey is a quite nice creature with a very nice ass and the ability to transport opium from Afgh to Pak and navigate the tough terrain and jagged cliffs in the mountains.....Yellen is not.

I would suggest a combination of turtle (the head) and turkey (the neck). Slow to move, able to hide it's head in the shell and smart enough to evade a hunter, but dumb enough to drown in the rain.

Remember that statement made to Kyle Bass? I think it's the plan. Just kill the dollar. Best way to kill the dollar is keep printing more of them, keep QE going. Deny it publicly, say they're tapering, but keep doing it privately.

They won't let Wall Street collapse. They won't the government collapse. They will keep printing dollars some how some way.

The only thing collapsing will be the dollar, just like they said. "We'll just kill the dollar."

The USD was dead a LONG time ago! (1971) What will be "killed" is the game-playing; rather, the ABILITY to continue the make-believe game that has been in place will die, and there's nothing that anyone can do about it. Again, the fundamental premise guarantees for failure: perpetual growth (on a finite planet).

"The secret plan is that we're going to keep doing exactly what we've been doing, for as long as we can."

The term "taxpayer" is very important here because it eliminates all non-productive people in America. Go ahead, follow that scenario through to it's logical conclusion and you quickly see why the "Homeland Security" boys and girls have been purchasing so much ammo.

And that sad part is that it has always been within our own control to NOT participate.

The illusion of freedom will continue as long as it?s profitable to continue the illusion.At the point where the illusion becomes too expensive to maintain, they will just take downthe scenery, they will pull back the curtains, they will move the tables and chairs out ofthe way and you will see the brick wall at the back of the theater.?

Note the date of George H.W. Bush's speech! (not that I believe that there could ever be an One World Government, but that's not to say that I don't believe the effort exists out there [and it's always about CONTROL])

It's a bubble within a bubble... Some could be said to more accurate to say that it's existed since 1913; I feel like it started with the "command" of "Go forth and multiply" (no Stop button ever provided- BAD PROGRAMMING!)

Lagarde is kinda/pretty hot - in her aging elitist perma-tan way. Yellen on the other hand... At least Yellen looks like she is/might be a woman...unlike other famous lib shims where it is hard to guess what they are...like say MooShell. Hitlery? What was Albright anyway? (I remember the story of Albright waddling after the terrorist criminal Arafat in the snow after Mr Towel stormed out of a "peace" talk in Stockholm... My mind is seared with that image - not to mention the stupidity of these lib idiots groveling over a criminal like that.

The Fed needs someone to take over buying bonds with QE ending, someone legit like bagholding Americans.. I think we are gonna see a bigger pullback in the markets this week and next, to get people thinking again haha

agreed. not saying Im buying that as the goal, but the idea the you can control a collapse is absurd. Yet, so it the idea the you can infinetly print money and fix everything. My opinion, they have been trying to paper over and lie their way out of the depression we are in for the past decade. They are desperate, and are doing everything in their power to keep the ponzi alive as long as possible because they fear the aftermath of what happens when the consequences of the past bad decisions finally blow up in our faces

You're confusing a controlled collapse with a controlled outcome of said collapse (aka "soft landing").

A controlled collapse is nothing more than ensuring the charges are all deployed, and the timer is set correctly. Then they run off somewhere safe, awaiting the chance to steal everything in the aftermath.

That's a plausible explanation of things, but not the only one, of course.

Another possibility is that your scenario is a deliberate illusion they're trying to create to obscure the fact that their true goal is to gut the financial system enough from the inside that a collapse is inevitable... that no one can come in and fix it once they've done enough damage.

Yet another variation could be that the puppets currently in charge are trying to keep the charade going as long as they can, for the reasons you state, but the puppeteers behind the scenes are orchestrating the collapse so they can usher in their "New World Order" from the inevitable chaos from the collapse, which will make any opposition to their evil scheme far far weaker.

In other words, your description of what the useful idiots are doing may be spot on, but still misses the bigger picture.

Perhaps time will tell.

But it isn't a pretty picture either way it appears to be playing out.

you may well be correct, although i hope you are not. Im a certified tin-foil hat wearer, but i still think the simplist explanation is usually the most probable- these bumbling idiots have royally fucked us over, and are desperate to keep this charade going as long as possible becuase they fear the consequences. Now, if I am correct, I do believe that the aftermath of such collapse could very well bring about what you speak of, or at the very least an even more authoritarian govt than what we have now. It would be nice if everyone on here, and this entire sight were wrong, but I doubt it. In now way is this shit sustainable

Excellent comments. I tend to believe they know that too many of us smell a rat and a false flag is out of the question-for now. They have time to wait for a natural disaster to occur whether natural or helped along by the goons and blame it on rebuilding. Think of the Children.

"Another possibility is that your scenario is a deliberate illusion they're trying to create to obscure the fact that their true goal is to gut the financial system enough from the inside that a collapse is inevitable... that no one can come in and fix it once they've done enough damage."

You CANNOT fix a flawed premise!

If there's any fix on it might be to remove the means for trying to continue the illusion of perpetual growth (on a finite planet). Sigh, we're not grown up enough to grasp this fact, so we'll continue to lobby for trying to save/fix/"take back" that which is destined to fail. Perhaps TPTB are going to give "us" what we "want"- they'd just hand over that grenade with the pulled pin...

Carl I think the real problem in economics is this commitment to the assumption of "an economy". So a controlled collapse is a misleading idea...

There is no "economy". There is only the aggregation of behaviour and consquence of people and this amorphous state of reality need never behave in condcordance with "a rational bias". Psychology and propaganda are much more effective tools of government policy than the issuance of debt or spending programs. Politics and economics have become almost indistinguishable lately and Keynesianism was the unholy conception that sealed the union.

It is a ponzi, an ideological ponzi and it goes well beyond the FED, banks, or the bourses. Ultimately this is about power, political power. Control the agenda, control the language and the frame of reference - you control it all. Despite overwhelming scientific evidence for the failure of socialist policies and the destruction of the price discovery mechanism, politics has always delivered more socialism and found economists willing to overlook their responisbility as a professional for a sure paycheck.

Really, I think all bets are off. It's just down to what people are willing to believe is reality and whether they are willing to be responsible. Given the state of general ignorance and apathy, she could probably do it. Hayek hints of this ability of politics to set the rules of the economic game... "It seems to me that socialists today can preserve their position in academic economics merely by the pretense that the differences are entirely moral ("value") questions about which science cannot decide."

We're all playing with an utterly impossible set of beliefs. Again, "Go forth and multiply" could be said to be the origin of our destiny to slam full force into brick walls. TPTB, in all their incarnations, understand this and that we are pretty much wired to behave this way, are our "entertainers," they give us the cornicopian feelings, feelings that would otherwise be impossible if the full facts were there staring in our faces; in "return" the get to live higher on the food chain... (and always they are human, they are also "us," no ticket to get out of this alive).

The "behavioral" change isn't likely possible, lest we end the human race. Japan is a great study here as you can see what full-force cornucopianism brings- fetishism and a decline in reproduction (as the environment's ability to support its population degrades underneath its feet).